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Thursday, 04 April 2013 17:41
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CERC says industry health as vital as consumer interest


While the Cabinet is yet to take a decision on coal price pooling that can potentially help get more than 30,000 MW of coal-based power back on track, the Central Electricity Regulatory Commission (CERC) has made some important policy pronouncements while giving relief to the Adani Group’s 4,620 MW power project in Mundra in Gujarat. While Adani wanted to terminate its power purchase agreements with power utilities in Gujarat and Haryana on grounds the Indonesian coal it was buying had become much more expensive following a change in government policy—it called this a force majeure event—CERC refused to accept this was a force majeure event. That said, the majority CERC ruling (one member gave a dissent ruling) was that Mundra needed some relief and a committee is to be set up to decide on a “compensatory tariff” till such time that coal prices come down to levels where this is no longer required. A CERC ruling is expected in a day or two in the case of the Tata’s 4,000 MW plant (also in Mundra) and if that is along the lines of the Adani one, it’s safe to assume some of the other power plants suffering the same fate could also land up at CERC.

How CERC decided Adani’s power plant needed relief while ruling the Indonesian event wasn’t a force majeure one is interesting. CERC says that while the electricity policy demands it look after consumer interest, it also needs to ensure power producers get adequate returns since continuous supply of electricity is also part of its mandate—if Adani stops producing power, CERC says, buyers will have to buy far more expensive power (between R3.5-7 per unit). This, of course, is the same argument the power ministry is making when arguing for coal price pooling—that while it raises costs a bit, this is outweighed by the impact of getting more power on stream. At the end of the day, the most expensive kind of power is no power.


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